Gulf states 5% VAT in 2018

Thu 14th Jan 2016

The six Arab Gulf states are completing the consolidated bills for the implementation of a regional Value Added Tax regime for 2018.

The introduction of VAT, to broaden the countries’ tax bases was first proposed in 2003. The recent sharp falls in global oil prices, which the states rely on for over 80% of their state revenues, has forced them to complete the introduction of the indirect tax regime.

The plan would include a VAT rate of between 3% and 5%, with exemptions for health care, basic foodstuffs and financial services. Once the final laws are agreed, any two states will be able to implement the new tax – potentially from 2018. The other states would then join the common tax regime, which is designed to simplify reporting and compliance on intra-state trade.

The six Gulf Cooperation Council states include: Saudi Arabia; UAE; Oman; Qatar; Bahrain and Kuwait. They have been hit by the price of global oil falling from over $100 per barrel to below $40 in less than two years. Most of the states are only able to balance their budgets at $80 per barrel and have been forced into large cuts in expenditure and subsidies – believed to total $275 billion across the region.